US Fed meeting: The US Federal Reserve’s Federal Open Market Committee (FOMC) is all set to conclude its two-day policy meeting on Wednesday and announce the key benchmark interest rates for the American economy.
As global investors and policymakers await the outcome of the meeting led by Chairman Jerome Powell, the central bank’s interest rate decisions are expected to have widespread implications across the world economy.
Meanwhile, Indian investors are also closely tracking the US Fed meeting outcome as its likely to dictate the near-term trends in the Indian stock market.
“Indian markets are closely tracking the outcome of the US Federal Reserve’s policy meeting, with the Federal Open Market Committee (FOMC) set to announce its decision later tonight. This meeting holds particular significance as it will determine the trajectory of interest rates in the world’s largest economy amid rising concerns over fiscal instability, moderating inflation, and ongoing labour market weakness,” said Sugandha Sachdeva- Founder-SS WealthStreet.
What does the market expects from US Fed meeting outcome?
In September meeting, the Federal Reserve reduced policy rates by 25 basis points, setting the target range at 4.00%–4.25%, and signaled the likelihood of two more cuts later this year.
In this context, markets are broadly anticipating another 25-basis-point reduction, which would mark the second cut of 2025. The expectation stems from softer-than-expected US inflation data for September, continued weakness in labor market indicators, and the extended government shutdown that has dampened consumer and business confidence.
“ A larger-than-expected rate cut might also be interpreted as a signal that the Fed sees heightened downside risks to the US economy, which could trigger short-term risk aversion across global markets. Hence, the tone of the Fed Chair’s post-meeting commentary will be just as critical as the rate decision itself. If Chair Powell acknowledges risks stemming from the ongoing tariff war and the government shutdown, it may imply a continued accommodative stance into December, reinforcing expectations of further easing,” Sachdeva explained.
Sachdeva further said that a dovish Fed would likely be supportive for Indian risk assets, while a cautious or ambiguous outlook could introduce short-term volatility.
“Overall, while a 25 bps cut appears largely priced in, the Fed’s forward guidance and tone, whether hawkish or dovish, will be key in determining near-term trends in Indian markets, including equity indices, currency movement, and bond yields,” she added.
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